"This announcement marks the end of the solely combustion engine-powered car," said Volvo CEO Hakan Samuelsson in a statement.
The company will split its offerings between pure electric vehicles, plug-in hybrids and mild hybrids, which use a beefed-up starter motor to both capture lost energy and help the combustion engine with brief bursts of electric power.
Volvo, which is owned by China's Zhejiang Geely Holding Group, will launch five fully electric models between 2019 and 2021 — three badged Volvos and two from its newly announced Polestar standalone premium brand.
Volvo's new factory in Charleston, S.C., will be one of the production sites for the electric cars, Samuelsson said in a press conference last week. He gave no indication which model will be built in the plant, which comes on stream in 2018, or when, but he said that all the pure-electric Volvo cars will be built on the company's two existing platforms and will be built on production lines alongside standard variants.
This strong focus on electrified models represents an about-face for Volvo, which had previously said pure electric cars didn't make a great business case. Volvo even said in its 2016 company report, published in March of this year, that market projections for EV ownership were "extremely uncertain" and that "battery costs need to drop significantly".
But progress is happening that affects those calculations. Battery costs have dropped dramatically, and electric vehicles are predicted to cost the same as internal combustion engine cars in 2018, according to a study by investment firm UBS.
And Toyota said last week that 40 percent of its European sales in the first half of this year were regular hybrids, the first time the it has reached that mark.
"Things have changed and we can change our mind," Samuelsson said. "Battery costs have come down, and there is some movement on the charging infrastructure."
He acknowledged the success of Tesla and declared that Volvo's announcement marked the moment that the company becomes "the second premium car maker in the world that is becoming all electric".
"Tesla is a tough competitor we respect," he said.
Volvo already builds plug-in hybrid versions of the XC90 large crossover and S90/V90 large cars — called Twin-Engine in Volvo's badging strategy — but those vehicles' penetration is very low. Just 2.4 percent of Volvo's 82,726 sales in the U.S. last year were hybrid models, according to figures from analyst and research firm AID. In Europe, Volvo's biggest market by far, its hybrid share was 4 percent of its 290,004 sales in 2016.